The Australian Medical Association Limited and state AMA entities comply with the Privacy Act 1988. Please refer to the AMA Privacy Policy to understand our commitment to you and information on how we store and protect your data.



17 Mar 2017


It happens every year around this time – the annual hand-wringing around the increase in private health insurance (PHI) premiums.

This year we had the new Health Minister Greg Hunt claiming that it was good news, as we had the lowest annual rise in a decade. We had the Shadow Health Minister Catherine King lamenting the rise and calling it another failure of the Turnbull Government.

The television cameras seek out healthy 20-somethings on comfortable, if modest, wages querying the diminishing value proposition of holding PHI. Here’s a prediction – a variation on this story will happen again at the same time next year.

Health costs increase year on year. Health CPI outstrips real CPI every year. GPs and other specialists in private practice know this as they struggle under the weight of both sides of politics’ lamentable decision to freeze patient rebates.

Bureaucrats running public hospitals in the States and Territories understand the inevitable increase in costs year on year. But rather than this annual mourn, let’s consider the drivers of the increased health costs.

First, the bad news. Australia, like most countries around the planet, has seen an explosion in the rate of obesity in the past 40 years. Obese patients are more likely to get sick. They are more likely to have complications from any treatments. There is a near linear association with the risks of a whole variety of medical conditions including hypertension, hypercholesterolaemia, type 2 diabetes mellitus, cardiovascular disease and many cancers. This is just the tip of the iceberg. Obesity represents the Public Health emergency of our age.

Australia and Australians have a problem with alcohol. This drives increasing health costs. We are world leaders in tobacco control, but lamentably still 12-13 per cent of people daily undertake a behaviour that will kill half of them, and substantially reduce the quality of life of the other half.

We are dealing with a scourge of illegal drugs and the particular menace represented by methamphetamine use.

There is a little bit of good and bad in the ageing of the population. It represents success in our health system. It also represents opportunities to significantly improve care. Palliative care services are largely inadequate, and they drive the community’s fear about dying - supporting sometimes very simplistic arguments in favour of euthanasia and assisted suicide.

If it is not next week, it will be the week after that Minister Hunt is making an announcement of an exciting new technology. Whether this is a new drug for treatment of cystic fibrosis, for hepatitis C, for metastatic malignant melanoma, or for something else, it will be exciting news for the sufferers and their loved ones.

Not a week goes by without tabloid newspapers making a case for PBS listing of medications, which typically cost in the tens of thousands of dollars for a treatment course. All of this money has to come from somewhere.

Next week on the news you will see another exciting new development in minimally invasive surgery, genomics, or another unforeseen piece of disruption or innovation. Every year, the manufacturers of implants and prostheses are looking for some benefit in terms of longer life span or reduced complication rates. All of this costs money.

An argument the AMA consistently makes to Government is that the costs in the health system should be regarded as investments. This is inevitably the case. We must look for things that are good value for money, and it is why we will never tire of reminding governments of the importance of good public health policy, other preventive measures, and the spectacular value for money that Australia’s world-class general practice workforce represents.

However, it remains inevitable that patients will from time to time need to access public hospitals. These must be funded better.

Equally, many Australians will seek care in private hospitals and seek to use their private health insurance (PHI). Australians have an interesting relationship with their PHI. They don’t lament the fact that they haven’t cashed in their fire insurance or home insurance at the end of the year.

But there is an expectation that they will have used their PHI, even if it is for something as dubious as a Reiki session or a new set of gym shoes. If they are lucky, they might have had $150 off their dentist bill.

That culture is unlikely to change as the value proposition of PHI is inevitably benchmarked against the high quality care delivered in the public system.

So let’s stop the annual hand-wringing exercise.

Health costs will inevitably increase year on year. I propose an intelligent public debate on how we support the private system - the system that offers Australians choice. The system that is responsible for over 70 per centof operations and surgical procedures. The system that embraces innovation, efficiency, and contributes to universal health care and the blended system that is in so many ways the envy of the rest of the world.


Published: 17 Mar 2017